Have we reached the end of smartphone price inflation?

This article may contain personal views and opinion from the author.
Have we reached the end of smartphone price inflation?
During the last few years, a worrying trend was established on the smartphone market: prices of smartphones have been slowly creeping upwards. Things have gotten to the point where when we hear about a new high-end device being released, we mentally prepare for a four-digit price tag. If before you could buy the best Samsung or Apple phone available for about $650, now you have to fork out close to $1,000. But all that didn’t happen because people felt like paying more for their phones. So why did it then?

How did we get here?


Тhere’s no one clear reason for the price inflation. Instead, there are multiple factors coming together to set the whole thing in motion. Here are some of the major ones:

1. Smartphone sales are declining


For almost two years now, global smartphone shipments have been steadily going down quarter after quarter. The main reason for that is that most markets, or at least the ones that bring the most revenue, are already heavily saturated, and with the quality and performance of smartphones from all segments improving, people are holding onto their devices for longer. But investors only want to see positive trends, so companies increase prices to make up for the profits lost due to lower sales numbers.

While that works to an extent, the higher prices also force even more people to keep using the phones they already have, because the cost of upgrading is not one they can afford every year or two.

2. People are rarely paying full price for their phones


Carriers come up with all sorts of lucrative deals to sign new customers but even without one, it’s a lot more convenient financially to pay for your phone over time rather than having to drop a thousand dollars all at once. However, this also makes it easier to hide price increases. A $200 price bump spread over 24 months, the standard contract length, equals just over $8 per month. No big deal, that’s like two cups of coffee, right? Sure, then 2 years later, when you’re already used to what you’re paying, you can justify another price hike using the same logic. Before you know it, you’re paying twice what you were just a few years ago.

3. High-end phones became more “premium”


In the past, the smooth and lag-free performance was something that top-tier smartphones stood out for. Today, pretty much all but the cheapest devices offer an experience that’s good enough for most people. This forced manufacturers to look for other ways to diversify their lineups and make their flagships stand out from the crowd. We started getting all sorts of “premium” features: from hardware additions like multiple cameras and wireless charging to different materials and even premium color options.
 
All that was meant to create a new class of more luxurious looking and feeling devices that can be marketed as the creme de la creme of smartphones and carry the appropriately high price tag. It seems, however, phone makers have reached a price plateau for smartphones.

Have we reached the psychological price ceiling?


Apple was the first popular brand to hit the $1,000 price tag, and although that was shocking at the time, it wasn’t long before it became the norm. Samsung and Huawei, the brands closest to Apple on the market, were quick to come up with their own $1,000 models. Sadly, that round number is not where the money crusade stopped.

Currently, both Apple’s iPhone XS Max and Samsung’s new Galaxy Note 10+ start at $1,099, and that’s for the base storage option. That might give the impression that manufacturers aren’t done with raising prices yet, but the data shows that consumers aren’t really on board with how much high-end phones cost these days.

On Apple’s side, that’s made clear by the company’s sales numbers. The cheaper iPhone XR which retails for $749 is by far the most popular 2018 model. Is it because Apple made it too good for its price or are consumers voting with their wallets by saying that $1,000 is too much for that premium feel? It seems most people can’t find enough value in Apple’s more expensive models that’s worth the difference. 

Over at Samsung, things are a little different. Its largest and most expensive phone from the Galaxy S trio, the S10+, is actually the one that’s been selling the best. However, Samsung phones are often part of deals that greatly reduce their prices, and you can easily find a Galaxy S10+ for around $800, which is a much better value for the device that you’re getting.

And now, with the release of the Note 10, Samsung decided for the first time to offer a smaller and cheaper variant of the phone that’s $50 below the $1,000 threshold. This move has a double effect. Firstly, it seemingly reverses the price inflation by keeping the price below the four-digit psychological limit some people have. Secondly, it allows Samsung to go all out with the plus version without having to worry if it will cost too much. Once you have an affordable option, you can safely rig out the other variant for those consumers that don't care about the price but only look for the best of the best.

OnePlus did something similar with the release of its latest smartphones. The regular OnePlus 7 is for those looking for an affordable phone with top-tier specs. With it, the company made sure it's not abandoning its loyal fans. Meanwhile, the 7 Pro is for those that don’t mind spending more for treats like a 90Hz display and a third rear camera. It won’t be surprising if in a couple of generations, the “Pro” version reaches the coveted $999 price tag.

But if you’re thinking companies are happy hovering around $1,100, then you’re forgetting the latest trick for squeezing the most of consumers.

5G — the cash grab of 2019



5G is still in its infancy which allows manufacturers to market it as an “ultra-premium feature” and charge for it accordingly. It came as a godsend just when companies were struggling to find a reason to sell even more expensive smartphones. “Futureproofing” a smartphone by adding 5G capabilities to it in 2019 can easily cost users between $150 and $200 on top of the four-figure price tag of their smartphone of choice.

The question is: will phone makers use this opportunity to raise the price bar even higher and keep it there once 5G is on every premium device, or will they be content to go back down to the current range when the manufacturing cost of 5G components goes down and the technology loses its early-adopter appeal?

The latter seems more plausible considering companies are already pushing the limits when it comes to prices. So don’t worry, you’ll still be able to buy a top-of-the-line smartphone for a thousand bucks a few years from now. However, there will be something else that might lure you to drop even more cash on a phone.

Foldable phones will take prices to new heights 


Foldable smartphones didn’t make the entrance they were hoping for. In fact, they’re barely even here, but make no mistake, they will come sooner or later. And with them will come new sky-high prices. We already know Samsung and Huawei are planning to offer their upcoming foldable handsets for around $2,000 and that’s without adding the 5G premium.

Once foldables are established as a separate segment of smartphones, they will take a life of their own. That means they’ll probably go in two different directions. On one hand, devices with flexible displays will get cheaper and more abundant, just like regular smartphones did. On the other hand, this new technology opens new possibilities for manufacturers to make even more premium devices. They’ll have more space for additional features, different sizes and fold types to experiment with and luxurious materials to make them out of.


We wouldn’t be surprised if certain brands not only keep their foldable devices around the $2,000 mark but venture further up the price ladder, perhaps even beyond $2,500. There's no telling exactly where foldable displays will lead us.

The ultimate answer


So, if we have to answer the question from the title in one word, it would be "No". However! That's only because smartphones themselves are undergoing a metamorphosis and their new form requires price adjustments. But at the same time, if you're adamant to not pay a dollar above $999 for your smartphone, you shouldn't be worried that you'll get less for your money in the future. 

With the fierce competition that exists among smartphone makers and the realities of the global market, we as consumers are ultimately getting better value. That's even more so if you go a step down in price where the profit margins are usually slimmer thus you're getting more bang for your buck. Companies are expanding their smartphone lineups and with the improved choice you're free to get the devices that fits your budget and needs best. All in all, the situation isn't nearly as bad as it looks at first glance.

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23 Comments

1. AbhiD

Posts: 721; Member since: Apr 06, 2012

LOL NO! Situation is worse than EVER! Every single year flagship phones are getting costlier by $100-$200 and their cheaper counterparts actually offer inferior specs than the previous generations despite similar or higher pricing. Note 4 in freaking 2014 offered QHD screen, 3.5 mm jack, expandable memory, infrared sensor, heart rate sensor, UV monitor. All of these have been cut in the latest Note 9 and price has still increased. Not to mention, sales of Samsung's Flagship series have taken a serious hit which is being compensated by sales from Mid range phones. Unlike the flawed logic you provided. Same is the case with Apple, where people don't have any option to go for Mid Range devices, so they go for lesser priced of the latest models. BTW, the day Pro model of OnePlus reaches $999, others will be launching their flagships for $1500-1600. PS - This article does a really poor job of justifying ever increasing exorbitant prices of Flagship smartphones. Customers aren't getting better value for their money. They are being ripped off.

5. TheOracle1

Posts: 2215; Member since: May 04, 2015

Agreed. As a phone enthusiast I pretty much know what features I want and are actually worthwhile. I can also wade through the bull$hit marketing terms. Retina Display? Lol. I don't need or want wireless charging, QHD, a stylus, NFC, reverse wireless charging, face id or crazy colors I'll put in a case. Fortunately there'll always be companies like Xiaomi and Asus to keep some sanity in the market.

11. superguy

Posts: 448; Member since: Jul 15, 2011

Agreed. I needed a new phone (broke old one) and the OP7 looked perfect for me. Ticked all the boxes, had everything I wanted and nothing I didn't. For some dumb reason, OP decided not to release it in North America. It released it elsewhere for the same price or less as the 6T and tried to sucker us "dumb" Americans and Canadians into buying last year's model at a paltry discount. I was quite happy with my OP6 before it died. Only thing I didn't like on it was the notch, but they did a good job of making it unnoticeable and not interfere with normal use. I ended up buying the OP7 Pro, but not because I really wanted it. It has a lot of features I don't care about or don't want. I hate the curved screen. Despite all the firmware updates, the screen is still overly sensitive. 90 Hz refresh rate doesn't seem noticeable to me, even when setting it to 60 Hz. I guess the cameras are ok, but it' s not something I deeply cared about. I have a real camera for the great pictures I wanted. As long as it takes decent pics I'm happy. So I ended up with a phone that I'm not terribly happy with and paid more for it than I would have liked, simply because I needed a phone. If the 7T comes out and is like an upgraded to the 7, I'll dump the 7 Pro. That said, I think we need more similar devices in that price range. Asus is coming up with some good options, and I think HTC and Moto could come up with something decent for that segment too. And even throw in some vendors like Xiaomi. They just need to make sure they throw in all the NA LTE bands like OP did.

2. legar123

Posts: 56; Member since: Mar 26, 2019

Whether you love Apple or Samsung, there's no justification to continously support their policy of increasing pricing by several hundred yearly. If so, I will be switching to something more affordable like One Plus or Xiaomi.

15. LiveFaith

Posts: 455; Member since: Jul 04, 2015

If it weren't for the S-pen, I would have jumped from Samsung to OnePlus etc a long time ago. Nobody will compete in the pen space tho. That OnePlus7Pro is one sick device for a ton less.

23. CableTelcontar

Posts: 91; Member since: Nov 19, 2014

Seriously. I'm stuck on Samsung cos no one else has a pen of similar capabilities. No one is even close.

3. User123456789

Posts: 824; Member since: Feb 22, 2019

Not yet ... Transparent oled (required to hide camera) costs much more than current oled. Next year phones will use ddr5 RAM. Gorilla 7 will come this year or next. Sony spends tons of money to develop new sensors, they will charge a lot for them. Upcoming CPUs will cost more than current. Components will get more and more expensive.

12. superguy

Posts: 448; Member since: Jul 15, 2011

Not necessarily. How much of that is REQUIRED to make a good high end phone? And does a small percentage increase in performance justify a double digit increase in price? For most people, the answer is no. We've finally hit the realm of "good enough" for most people. Yes, there are people out there who want the fastest, the best, or most premium and will still buy the devices regardless. But for most people? I think they'd be quite happy with 90% of the performance at 75% of the price. Midrange devices are about at the point where a high end phone was a couple years ago. Do most people even notice the difference? Anecdotally, I can tell you that my very non-technical wife barely notices a difference between her old S8 and current S10e. Biggest thing she noticed was size and the flat screen. As long as it runs smooth and does what they want it to do, I don't think most people care whether they have a high end or midrange phone.

19. raky_b

Posts: 384; Member since: Jul 02, 2014

Sony had invented tons of money in previous sensors, as Qualcomm did in last year's top SoCs, Samsung used "best ever" Amoled screens at least in last 5 years... Technology that came with flagship devices was always new and most expensive at the time... Investing "tons of money" is not something that they started to do now. So, there is no other explanation for price increases, but greed. Not just greed of smartphone producers, but of all of those included in production chain. (Is SD850 really worth double as SD820 was at the time?)

4. maherk

Posts: 6771; Member since: Feb 10, 2012

I doubt it. Apple and Samsung will keep on finding ways to increase their prices, and eventually, Chinese OEMs will follow their lead.

6. inFla

Posts: 96; Member since: Aug 17, 2018

Other than some features and apps added by choice, does anyone use all the other features?

13. superguy

Posts: 448; Member since: Jul 15, 2011

I think many features are added anymore to justify a higher price. And some features are added just for the sake of being an added feature.

7. CableTelcontar

Posts: 91; Member since: Nov 19, 2014

I doubt it. As long as there are dumb people like myself that will by the latest Galaxy Note at whatever price and other dumb isheep that will buy whatever latest phone with a fruit on it, I guess the prices will still go up. But I swear, after this Note10+, I'll be holding on to my devices for 3 years now. I hope.

8. iami67

Posts: 333; Member since: Oct 18, 2011

Wow i sometimes think the authors here have no clue about cell phones at all. I mostly come here to see how wrong they get it. The biggest reason for cell phone decline is the new way to buy cell phones at least in the USA. You used to be able to sign a contract and get a new iphone for 200 bucks. Now the companies got rid of contracts and make customers pay the full retail of the phone. People would come in and say im due a upgrade i might as well take it. Now they see there bills goin up 30 to 40 and hearing its about 800 for the phone thats scares them away. that my friends is the biggest reason. Even if the over bill is cheaper the new way people now see the cost of the phone. they still come in saying why arent i due for a upgrade at a discount.

14. ShadowHammer

Posts: 201; Member since: Mar 13, 2015

I think this article was pretty well written, and brings up some interesting ideas regarding the price increases. Maybe the ideas are not all correct, but I'm not seeing anything in the comments that provides much of a counter. I do question how much the foldables market will shake things up, though. What I've seen so far doesn't get me excited to get one when they finally do come out. But this is coming from someone who won't pay above $300 for a phone, so these expensive devices probably aren't geared towards me anyway. I often think of laptops and their pricing when I see discussions on smartphones' pricing. Premium laptops can easily go over $1000, and people don't seem to balk much. I actually would suggest that smartphones are more complicated than laptops, because they have to fit more tech in a smaller platform (and yes, I'm ignoring the performance differences for this assertion). This could be used as justification for higher prices, or maybe someone could argue that we have been getting a good deal on smartphones for many years, and now things are finally being brought up to their proper pricing. But I doubt most people would go along with that. Interesting to think about all the same.

17. p51d007

Posts: 704; Member since: Nov 24, 2013

Oh yes there is...because consumers were "willing" to continue to fork over the money year after year. Now, consumers are learning that last years phone, is "good enough" so why fork over the money? Using the iPhone for example, not factoring in the marketing, has a build cost of 300 dollars, on average, but sells for over 1,000 dollars? They've gotten away with it, because consumers were putting up with it. Now, consumers are starting to get tired of forking over that much money. Market saturation and people not waning to spend a ton of money ever year or two. It's about flipping time! "Тhere’s no one clear reason for the price inflation"

18. mackan84

Posts: 375; Member since: Feb 13, 2014

Well I’ll be darned... A comment-thread where everyone gets a long and has a common interest. Warms my heart, wish every thread was like this.

21. JCASS889

Posts: 508; Member since: May 18, 2018

Truly a first. Ive actually enjoyed reading the comments.

22. joey18

Posts: 666; Member since: Jul 20, 2010

apple phones are overpriced then with have to pay special insurance my xs max 45 plus 15 then tmo jump program 70 total plus your regular bill

24. Vogue1985

Posts: 448; Member since: Jan 24, 2017

All this nasty high prices. We in the states are partly to blame as consumer and these companies take advantage and cant blame with Apple cash milking schemes as the benchmark. Oversees the variety of phones is huge. There are many models and editions that Samsung especially have oversee that have all the flagship features but will never see the light in the USA because it means they will make have to see more units. And add to the Carriers have FAR to much influence on which Phones get media coverage (aka carriers are paid to promote certain brands)leaving the others behind. The excuse of parts etc are expensive is crap,all these tech are cheaper than they ever have been,especially with how big phones are now. If they were small like a BlackBerry 9900 or iPhone 4,then it would be sense.

28. TheHitman1982

Posts: 94; Member since: Dec 30, 2014

I am still rocking my iP7+ that I bought used for $400 2 years ago when my Nexus 6 (that I also bought used) bricked on me after a few years overnight and I have no plans to upgrade anytime soon. $1000 for a cellphone is rediculous. The faster these companies realize that people aren't going to pay that, the sooner the price will go back to normal range. The problem is there are stupid people out there who still pay these ridiculous prices. When consumers vote with their wallets companies pay attention.

29. p51d007

Posts: 704; Member since: Nov 24, 2013

In the states, I think part of the problem was the "two year contract" where people THOUGHT they were getting a new phone for 99.99 bucks a month, when as we all know they were paying MUCH more for it by hiding the actual retail price, in the monthly service charge. Once they sort of kind of got rid of that some could actually "see" the real price. Personally, I think anything more than 400-500 bucks it over priced, considering the markup on the phones. It's all basically "eye candy" that, in reality you can't really see because you stick them in a protective case. Glass on the front, ok, I get that, but to make the back out of glass too? Just slap a plastic case on the back and call it good. Same with the "designer colors" Who cares? Can't see it anyway. But, it helps drive up the price.

30. TheHitman1982

Posts: 94; Member since: Dec 30, 2014

I dont care about designer colors either but some people like me dont use cases. They make phones feel like you are carrying around a brick. Way too baulky.

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